we know that Srpt has been added to the Russell 2000 Index, effective at market close on June 28, and that based on Russell formulas, the applicable index Funds will need to purchase approximately 2,800,000 shares of Srpt at market close on June 28 (we know this because the preliminary Russell 2000 rebalance list was published at 6pm on Friday)
what we guess about is how the market makers will supply all that stock to the buying funds
perhaps they MM's will do what they typically do and naked short the stock to the funds using their "bonafide market making exception" to SEC Regulation SHO ... under that exception, the trade becomes a T+6 trade, as opposed to the regular T+3 trade ... so even with this exception, the MM's will still subsequently have to buy the stock long to close the short, but the long proven reality is that they will do their dirty on the trading to make sure they get the stock back and do not lose any money
and if I may digress for a moment, market makers CONTROL the market at least 75% of the time, make no mistake about that
but if the MM's are afraid to short that much Srpt, perhaps they will accumulate the stock long in advance of June 28 and then sell the stock long on that date to the buying funds
we have been through this all before bla bla bla
so that is MOSTLY what we know, and then what we guess about
but there is something else we DO know, that is also very important
AND THAT IS THE DIRECT IMPACT THE RUSSELL 2000 ADDITION WILL HAVE ON THE ALREADY VAPOR SRPT FLOAT
here is why
it is literally universally known that when stocks go into Index Funds, they come out, share for share, out of the available float, period end of story
and remember, Index Funds are universally perfectly myopic creatures, in that they absolutely own you if you are in the Index, and conversely, they do not own a single share of you if you are not
to be continued!
It will be a gradual increase but no major price spike as this is an annual event and brokers already have this down to a science as they have an agreement to deliver xxxx amt of shares to index guys at the closing price on June 28. It only gets tricky if there is a major event before the end of month then there could be a major move as the fight for shares. This same situation is occurring with another long pos I have INSM. Think upcoming data will be a home run for company as it will validate platform for pulmonary infections. Data could come out in next few weeks which would spike the shares closer to $25, add the shares Russell guys have to buy and you could see SRPT deja vu....Keep eye on INSM in next few weeks... Think over $25 by end of summer.
Like INSM also- just gut coverage from UBS today. Firm thinks upcoming results will be pos and stock will trade in 20's also. See :
In the near-term we believe the stock will continue to move higher as physician
feedback continues to point to significant market share potential based on oncedaily
dosing. That said, we see a positive CF study as the major catalyst with
positive data potentially pushing the stock into the $20s.
This is a good discussion. So the Russell rebalancing is driving everything. Is there any idea of why the price has stablized at 38.50? Should we expect to see that point maintained up until the rebalancing? Any opinions.
All the shares of the incoming stocks have already been purchased by broker dealers on behalf of the index funds, and only wait for the official account transfer to the index buyers from the broker dealers.
The same is true for the sales of the outgoing stocks. In this day of information, there are no surprises except that some people like you still don't understand the process.
Arrogant as ever, I see....
Bud, the point is that the re-balance is a managed process; the regulator on that process is the naked shorting exception held by the MMs. The PPS impact will be felt after the close on 28 June as those short positions which were used to hold a potential "bubble" in check are closed (as is required by regulation). Given the fairly thin float and the already high short interest in the stock it could create quite the momentum "push" - but it won't happen until after the re-balance.
It really doesn't matter at all when the broker dealers made their purchases as long as the MMs did their job in anticipation of the event - the effect will only be felt after the book date of the 28th. That's the process, and it isn't a "surprise" to anyone. I wouldn't expect a big "pop" after the re-balance but I do anticipate a gradual increase as those regulated short positions are closed. I also think that any positive news between now and the end of the first or second weeks of July (or certainly by the July OPEX) could cause a truly massive increase in the PPS. Guess we'll see.
Sentiment: Strong Buy
There are also alot of funds that short the Russell Indexes. Short interest will increase quite a bit as well...
On june 28th, the majority of shares bought by Russell funds will be done after hours, with little or not impact to share price, its a "book" entry.
continuation of long winded diatribe!
thus, if you assume 32,000,000 shares of Srpt outstanding, and a required Russell 2000 Index Fund buy in, they you have another 8.75% of the outstanding shares coming out of the float!
we KNOW this (whether we realized it or not), and this requires no further explanation as to its importance
the fact is that both long and short investors have no definitive clue if the FDA will wink up or down on the Srpt AA app
so anything can happen here, and that is what makes a market
but here is the rub a dub dub
if you are long and the AA app is denied for filing, your stock likely drops to 20 to 25 immediate term
and if you are short and the AA app is approved for filing, your stock likely goes to 65 to 80, one step sooner than immediate term
THE FLOAT IS VAPOR
any reasonable float analysis proves this out
I have said this before
if I had a large net short on Srpt, I do not think I could breathe right now